turning challenges into opportunities - vale · turning challenges into opportunities. the company...

2017 | AnnuAl report SummAry

Turning Challenges into

Opportunities

The Company was established by Deed No. 49 dated July 25, 1968, drawn up before Eliza Pondaag, a public notary in Jakarta. The Company’s Articles of Association was approved by the Minister of Justice of the Republic of Indonesia in Decree No. J.A.5/59/18 dated July 26, 1968, and published in Supplement No. 93 to State Gazette of the Republic of Indonesia No. 62 dated August 2, 1968. These Articles of Association have been amended several times with the latest amendment made by Deed No. 121, dated June 29, 2015, drawn up before Leolin Jayayanti S.H., a public notary in Jakarta, to reflect amendments to the Company’s Articles of Association as approved by the Extraordinary General Meeting of Shareholders (“EGMS”) on June 29, 2015. This amendment was approved by the Minister of Law and Human Rights of the Republic of Indonesia in Decree No. AHU-0938647.AH.01.02 Year 2015 dated July 3, 2015, and obtained acceptance of notification from the Minister of Law and Human Rights of the Republic of Indonesia in Decree No. AHU-AH.01.03-0948078 Year 2015 dated July 3, 2015.

LegaL Basis fOr esTaBLishmenT

COmpany name

pT VaLe indOnesia TBkThere was no change to the Company’s name in financial year 2017.

esTaBLishmenT daTe

JuLy 25, 1968

auThOrized CapiTaL

39,745,354,880 shares, with par value IDR25 per share.

COmpany generaL infOrmaTiOn

2 PT Vale Indonesia Tbk | 2017 | Annual Report Summary

WeBsiTe

WWW.VaLe.COm/indOnesia

9,936,338,720 shares, with par value IDR25 per shares.

issued and fuLLy paid up CapiTaL

May 16, 1990 at the Indonesia Stock Exchange. Share Code: INCO.JK

sTOCk exChange

LisTing daTe

The Energy Building,31st Floor. SCBD Lot 11AJl. Jend. Sudirman Kav.52-53Jakarta 12190 IndonesiaPhone : +62 21 524 9000Fax: +62 21 524 9020

head OffiCe address

Sorowako, Sulawesi SelatanJl. Ternate 44. Sorowako, Nuha - Luwu Timur 92984Sulawesi Selatan, Indonesia Telepon: +62 21 5249100Faksimili: +62 21 5249557

Makassar, Sulawesi SelatanJl. Somba Opu 281. Po.Box 1143Makassar 90001Sulawesi Selatan, IndonesiaTelepon: +62 411 873731, 873732Faksimili: +62 411 856157

represenTaTiVe OffiCes

sharehOLding

Vale Canada Limited (VCL)

Public

Sumitomo MetalMining Co., Ltd. (SMM)

Vale Japan Limited

Sumitomo Corporation

58.73%20.49%

20.09%

0.55% 0.14%

PT Vale Indonesia Tbk | 2017 | Annual Report Summary 3

2017 perfOrmanCe highLighTs

Decreased from 77,581 tons in 2016

niCkeL in maTTe prOduCTiOn

tons76,807

aVerage reaLized priCe

Increase of 10% compared to uS$7,396 per ton in 2016

US$

per ton8,106

reVenue

Increase of 8% compared to uS$584.1 million in 2016

million

US$ 629.3

million

US$ 111.6eBiTda

total nickel matte sales in 2017 decreased by 2% compared to 78,976 tons in 2016.All nickel in matte production is sold under a long-term sales agreement with 80% to Vale Canada limited (VCl) and 20% to Sumitomo metal mining Co., ltd. (Smm).

saLes

tons77,643

share priCe as aT deCemBer 31, 2017

the improved 2017 financial performance created a positive sentiment to the Company’s share price movement. the selling price for the Company’s shares ranged between its lowest price of IDr1,835 and its highest price of IDr3,340 per share

per share 2,890IDR

enVirOnmenTaL managemenT

from the ministry of environment and Forestry of the republic of Indonesia. Average So2 intensity 0.75 So2/kg ni from 0.86 So2/kg ni threshold

prOper Biru

total recordable Injury Frequency rate (trIFr)

OCCupaTiOnaL heaLTh and safeTy

0.79

TOTaL prOVen reserVes

82.7million tons (DKP)

TOTaL prOBaBLe reserVes

12.4million tons (DKP)

per ton6,444

Cash COsT

US$


COnCessiOn area

province Concession Area Hectare (ha)

Central Sulawesi Bahodopi 22,699

South Sulawesi Sorowako 70,566

Southeast Sulawesi

Pomalaa 20,286

Suasua 4,466

118,017 haCOnCessiOn area

CenTraL suLaWesi

sOuTh suLaWesi

sOuTheasT suLaWesi

Sorowako

pomalaa

Bahodopi

Suasua

mineraL reserVesCOmpany mineraL reserVes (miLLiOn TOn)

DescriptionAs at December 31, 2017 As at December 31, 2016

mt (DKp) % Grade mt (DKp) % Grade

Proven 82.7 1.80 91.7 1.78

Probable 12.4 1.73 19.2 1.75

total proven and probable 95.1 1.79 110.9 1.78


BoaRD of DIRectoRS’ RePoRt

NIcolaS D. KaNteRpresident Director


TO The sharehOLders, It is an honor for me, on behalf of the Board of Directors, to present PT Vale’s 2017 Annual Report.

2017 has reinforced the importance of our long term strategy: being a responsible and low-cost producer. As the nickel price remained at a critically low level compared to average industry costs, we have been able to maintain a strong cash position while continuing to build on our company culture of responsible mining.

CurrenT ChaLLengesThe last two years have been two of the most challenging years in our Company’s history, in terms of nickel price compared to operating costs.

We believe that to be successful now and into the future, we must be a responsible miner and corporate citizen, and we

must be a low-cost nickel producer.

While in the last quarter of 2016 the nickel price began to rebound, the price dropped significantly in early 2017 as the Indonesian government changed its nickel ore export policy to allow for limited ore exports once again. This led to concerns of another oversupply of nickel, as Chinese producers would be able to take advantage of the good quality ore now available for processing. While these supply concerns remain, in mid-2017 there was increased optimism on future demand, as China’s macroeconomic data was better than expected and also because of strong indications of future nickel demand for electric vehicles. This brought the nickel price higher for the second half of 2017, leading to an overall average nickel price of US$10,392 per ton in 2017, compared to US$9,483 per ton in 2016.


While there was a slight increase in the average nickel price, the cost of consumables increased significantly. The cost of fuel and coal increased by 36% and 39% respectively, on a unit cost basis. These two consumables represent the Company’s largest cost items, and thus the increased prices have led to a significant strain on the Company.

The combination of a relatively suppressed nickel price and higher prices of consumables created a unique challenge in 2017 for the Company.

Our sTraTegyOur company strategy addresses these current challenges. We believe that to be successful now and into the future, we must be a responsible miner and corporate citizen, and we must be a low-cost nickel producer.

We believe that being a responsible miner is the right thing for both our shareholders and for the world as a whole. This entails protection of the environment, valuing our people and collaborating with the communities around us. It also encompasses ethical conduct, good corporate governance and protection of human rights. In all these areas throughout 2017, we have built upon our past success to pursue the highest standards for the Company.

Given the cyclical nature of the nickel market, we also believe that we must maintain our long-standing position as a low-cost nickel producer so that we can withstand even the lowest point in the market cycle. As noted above, 2016 and 2017 were particularly challenging due to the low nickel price. In 2017, we had the added

burden of rising prices of consumables. Such conditions are largely outside the control of the Company, and thus we have long-stressed the importance of maintaining a low cost structure.

key iniTiaTiVesIn 2017, the company has advanced several initiatives, all of which to support our strategy of being a responsible and low-cost producer.

Safety is our priority, and goes to the heart of our strategy of being a responsible producer. The Company saw good improvements in this area in 2017. The focus throughout the year was implementation of a procedure on accountabilities for safety and behavior. For the past couple of years, the Company has implemented the Vale Integrated Management System which follows the Indonesia Mine Safety Management System based on Minister of Energy and Mineral Resources Regulation No. 38/2014, whose purpose is to eliminate and reduce hazards in the workplace by implementing Fatality Prevention Programs. In addition, the Company has rolled out the INS-003 procedure extensively across the company throughout the year. The intent of the procedure is to equip leaders with the necessary skills to respond in an appropriate manner to safety violations and behaviors below Company expectations. All leaders received training in 2017. As at the end of 2017, our Total Recordable Injury rate (TRIR) and High Potential Incident rate were reduced by 30% and 40% respectively, compared to 2016. We believe that the Company is on the right track to achieve zero harm goal in our day to day activity and business.


The Company saw good improvements in safety aspect in 2017.

Cost reduction was a major focus throughout the year. With the rising price of consumables, the Company continued our efforts to be more energy-efficient. For example, over the last few years, HSFO efficiency improved by around 31% from 30.7 barrels per ton in 2013 to 21.3 barrels per ton in 2017. This has been a key step over the last few years to support our strategy of being a low-cost producer. Sulphur consumption also decreased, which also reduced our sulphur dioxide emissions. To further improve our cash flow, we also reviewed discretionary spending and capital expenditures, and made significant cuts and deferrals where appropriate. In addition, we also renegotiated and changed our contracting strategy.

Productivity was also a focus, as always. The volume of ore processed was on par with our highest ever level, with 2017 calcine throughput reaching 4,511 kilotons. This was achieved through our Continuous Improvement (CI) program, which aims to eliminate bottlenecks and achieve greater efficiency throughout all operational activities. While processed ore volumes increased, production was impacted by lower ore grades in 2017. Operational constraints in the mines have affected our ability to achieve our targeted ore grades, and in turn have led to below-target nickel production.

Employee engagement initiatives were carried out throughout the year. These efforts are particularly important in challenging years as we experienced in 2016 and 2017, as there can be a tendency for employee dissatisfaction and associated problems. Aware of these risks, the Company was proactive in engaging people. In

a change from previous years, we reduced our town hall meetings and instead placed more emphasis on team leaders to take responsibility for communications with the team members.

Growth initiatives were reviewed in 2017 in response to the depressed nickel market. In 2016, the Company had made progress in identifying potential investors to form strategic partnerships for the development of Pomalaa and Bahodopi. Discussions however slowed in 2017, in response to the change in the Indonesian government export policy in January and low nickel prices which created doubts among potential investors on the competitiveness of new nickel projects. However, as the year progressed, new optimism emerged in relation to electric vehicles, leading to renewed interest in our greenfield projects. As a result, the Company is in discussion with several potential investors and is cautiously optimistic on the potential to identify a viable growth project. In parallel, the Company continues to push de-bottlenecking improvements in Sorowako to grow our production.


Corporate compliance initiatives, especially our anti-bribery and corruption program, gathered pace in 2017. By December 2017, 99% of permanent employees had attended the anti-bribery and corruption trainings. We also implemented a new internal approval compliance process. This process now utilized electronic forms to ensure easy access by all employees, making it transparent and auditable.

Corporate governance saw vast improvements in 2017. One key initiative was the formation of the Risk Mitigation Committee to enable best practice in risk and governance. We also established several new governance policies, to comply with the corporate governance guideline for public companies issued by the Financial Services Authority (OJK). These include a new nomination and remuneration process policy, a securities trading policy, an affiliated transaction and conflict of interest transaction policy. The improvement in Good Corporate Governance (GCG) performance resulted in an award from Indonesian Institute for Corporate

Directorship (IICD) for the Top 50 best corporate governance for Biggest Market Cap Publicly Listed Companies in Indonesia.

finanCiaL and prOduCTiOn perfOrmanCeIn the first half of 2017, the Company posted a loss of US$21.5 million, mainly due to low nickel prices. However, with a rise in nickel prices in Q3, the Company posted a profit of US$1.9 million for the quarter, followed by a Q4 profit of US$4.4 million; reducing the Company’s overall loss for 2017 to US$15.3 million. Despite the posted loss, the Company delivered positive EBITDA of US$111.6 million in 2017.

In 2017, the Company produced 76,807 tons of nickel in matte, a decrease of 1% from last year’s production of 77,581 tons. The volume of ore processed increased in 2017, however, nickel production declined due to lower ore grades. As nickel selling prices rose during the year, we recorded sales of US$629.3 million, 8% above the sales recorded in 2016 of US$584.1


million. The average realized price for nickel matte shipments in 2017 amounted to US$8,106 per ton. This was an increase of 10% compared to US$7,396 per ton in 2016. While there was a slight increase in the average nickel price in 2017, the cost of consumables have increased significantly. The cost of fuel and coal increased by 36% and 39% respectively, on a unit cost basis. The combination of a relatively suppressed nickel price and higher prices for consumables dragged down the Company’s profit.

Capital expenditures increased slightly compared to the previous year. The increase in capital expenditures was related to projects to maintain the Company’s operations, mainly focusing on completing the installation of Electrostatic Precipitator (ESP) kiln#4 to fulfill government regulations on particulate emissions.

reVieW Of resuLTs againsT TargeTsGenerally, during 2017, the Company demonstrated optimum performance to meet its established targets. We exceeded some targets and were behind in others, as detailed below: • Nickel in matte production reached 76,807

tons or 4% lower than the target of 80,000 tons.

• Revenuein2017wasUS$629.3millionor4%below target.

• Maintainedpositivecashflowfromoperationsand a healthy cash balance.

• TheCompany achieved its targeted PROPERBiru rating for environmental performance.

• Improved TRIFR to 0.79 (vs the Company’sthreshold of 0.80).

• Establishment of the gift and hospitalitymonitoring system.

Business prOspeCTsWith our strategy of being a responsible and low-cost producer, the Company is well-placed to be successful in all phases of the market cycle. We are able to withstand the low points, which we’ve experienced over the last two years, and are well-placed to take advantage of improved market conditions.

As a result, the outlook for the Company is positive. The global economic recovery is expected to continue. This condition will affect world demand for nickel, creating promising growth for the nickel industry, including in Indonesia. However, there are lingering concerns of oversupply of nickel, particularly from Indonesian ore exports. On the other hand, there is growing demand in the stainless steel sector as well as optimism for future demand from electric vehicle manufacturers. The Company remains cautiously optimistic of the future of electric vehicles.

Market Consensus predicts that nickel price will be in the range of US$11,955-US$12,886 per ton during 2018-2020. In 2021, the price is forecast to reach US$13,947 per ton, and in 2022 US$15,512 per ton.

Within Indonesia, the government continues its efforts to reduce bureaucracy and improve business conditions. In the mining sector, reforms are ongoing and are causing uncertainty for some companies that have not yet amended their contracts in accordance with the requirements of the 2009 Mining Law. Having already completed the amendment of our CoW in 2014, the Company has greater certainty for its future, and thus is well-placed to benefit from improving market conditions.


diVidend pOLiCyBased on the Annual General Meeting of Shareholders decision on Monday, March 27, 2017, the shareholders approved that the Company not distribute dividend to shareholders for the financial year ending December 31, 2016.

Changes in The BOard Of direCTOrsDuring 2017, the composition of the Board of Directors did not change. The composition as at December 31, 2017 was:• NicolasD.Kanter-PresidentDirector• BernardusIrmanto-VicePresidentDirector• Febriany Eddy - Director (Chief Financial

Officer)• Lovro Paulic - Director (Chief Operating

Officer)

COrpOraTe sOCiaL respOnsiBiLiTy (Csr)In terms of social responsibility in 2017, we continued programs such as our Environmental Management System, Integrated Management System and the Independent Village Partner Program.

The Company invited the Bureau Veritas Indonesia Certification Board to conduct a gap analysis using ISO 14001: 2015 for its Environmental Management System in our Sorowako operations. Using the ISO 14001: 2015 Certification program is one of many efforts that the Company undertakes to reach PROPER Hijau.

An ISO 14001 and OHSAS 18001 certified internal auditor also audited the Integrated Management System. The audit results showed 80.3% achievement, higher than our target of 79.2% and the previous year’s audit result of 74.8%. This indicates that the Company’s environmental management is running well.

The Independent Village Partner Program is one of our core programs and is directed towards improving communities’ capacity in education, health and economics, and strengthening local institutions and governance. This program synergizes with government efforts to accelerate poverty reduction through existing regional poverty reduction programs.

During 2017, the Company undertook development activities, including infrastructure development in the areas surrounding the Sorowako, Pomalaa and Bahodopi Blocks.

The Company also worked to reduce SO2 emission to the atmosphere. The Company has greatly improved its controls over sulphur additions to the process plant, which has resulted in an average emission of SO2 reaching 0.75 kg SO2/kg Ni, well below the threshold of 0.86 SO2/kg Ni as regulated by the government.

The Company continues to offer work opportunities to people coming from areas around the Company’s location, and other areas in Sulawesi, resulting in 2,929 people or 92.5% of the Company’s total employees coming from


these areas. Of these, 2,759 people or 87.2% are from the East Luwu Regency, South Sulawesi Province.

The health and safety of our employees is important to us and we are committed to implementing Occupational Health and Safety (OHS) by equipping all operational units with facilities and infrastructure to protect employees and other stakeholders from the risks of accidents. The purpose of OHS compliance and application is to achieve zero harm. During the reporting period, fifteen occupational accidents were recorded, none of which caused injuries. The Company has conducted investigations and evaluations of each accident to ensure there is no recurrence. During 2017, the Company did not receive any sanctions-related reports, complaints or grievances related to health and safety problems.

risk managemenTThe Board of Commissioners established a Risk Mitigation Committee in 2017, supported by the existing Risk Management Unit that reports to the Board of Directors, and assists the implementation of the Board of Directors’ duties and responsibilities related to risk management and internal control.

The 2017 performance appraisal results show that the Risk Management Unit performed its task well through the Company’s annual risk assessment process. This process formulates a risk matrix and mitigation plan based on

Thank youOn behalf of the Board of Directors

PT Vale Indonesia Tbk

niCOLas d. kanTerPresident Director

the assessment; quarterly review of risk management activities in response to mitigation plans; and actions taken on other matters as requested by the Board of Directors.

appreCiaTiOnIn closing, on behalf of the Board of Directors, I would like to express our highest appreciation to all Company’s shareholders and stakeholders, employees and customers for their trust and support given to us. We also would like to give our highest appreciation to the Board of Commissioners for its guidance during 2017. Our performance would not have been realized without the close cooperation, mutual trust and the spirit to continue to grow and innovate. We are confident that the spirit of the Corporate Values - “Do What is Right”, “Improve Together” and “Make It Happen” - will be decisive success factors in our performance as a company in 2018.


BoaRD of commISSIoNeRS’ RePoRt

maRK JameS tRaveRSVice president Commissioner


TO The sharehOLders, On behalf of the Board of Commissioners of the Company, I would like to present this 2017 Annual Report to the shareholders and stakeholders as part of our responsibility in conducting our supervisory function for the Company this year.

In our view, the Company has successfully navigated a potentially treacherous period over the past two years, by holding firm to the Company’s long-term strategy. Looking broadly across the global nickel market, 2017 was a year of immense challenge for producers everywhere. The Company was able to maintain a strong cash position while building on its foundation of being a low-cost and responsible miner.

In a year characterized by major changes in the Indonesian nickel sector and more broadly across the nickel market, the Company maintained its position as a world-class producer.

in a year characterized by major changes in the indonesian nickel sector and more broadly across the nickel market,

the Company has maintained its position as a world-class producer.

reVieW Of COrpOraTe sTraTegy impLemenTaTiOnThe BOC reviewed the Company’s strategy and is in agreement with the direction taken by the Company.

The global economy and Indonesia’s investment climate continue to improve in general, but there is significant uncertainty in the nickel market, especially on nickel supply. While there has been a general positive trend in the nickel price since mid-2017, nickel still lags behind other commodities in terms of price performance.

With such uncertainty, the BOC agrees with the strategy set by the Company to maintain its low-cost position, while also looking for growth opportunities in the future.


The BOC also notes the continued focus worldwide on corporate responsibility. Companies all over the world are under greater scrutiny to be transparent, operate sustainably and behave in an ethical manner. For this reason, the Company’s strategy of being a responsible miner is of prime importance for the Company’s current and future success.

reVieW Of prOduCTiOn and finanCiaL perfOrmanCeThe BOC congratulates the Company on its ability to maintain cash flow in these challenging times. While production is lower than last year, the BOC notes the operational improvements that have been implemented along with key improvements in safety culture.

The BOC also recognizes the efforts made to control costs without sacrificing the future. With the unexpected relaxation of the nickel ore policy in Indonesia, the Company was forced

to react quickly to a sudden drop in the nickel price. The BOC appreciates the Company’s swift efforts to manage costs and maintain employee engagement throughout this challenging period.

eVaLuaTiOn Of BOd perfOrmanCeThe Board of Commissioners considers that the Board of Directors’ performance in 2017 was good and they have been able to face the economic challenges in the year of 2017. The Board of Commissioners offers its appreciation to the Board of Directors for their leadership, commitment and hard work.

There was a production shortfall in 2017 but in hindsight our initial targets may have been a bit too aggressive given the operational constraints in the mining areas. The Board of Directors faced more problems than anticipated, but what is important is that they have learned a great deal from the experience in 2017.

target Achievement

Deliver Occupational Health and Safety target – a combination of health and safety program execution and occurrence rate of injury/incident during the year.

Exceed

Deliver unit cash cost target Below

Deliver targeted Free cash flows Below

Deliver targeted EBITDA Below

Execute work plan as per road map developed to achieve best practice in corporate governance practice

Exceed

Deliver sustainable business practices in areas of environment, energy utilization and social interaction

Exceed

Deliver the agreed strategic agenda which covers the following area: COW commitments, strategic capital projects, anti-corruption/bribery and workforce engagement

Met


frequenCy and manner Of giVing adViCe TO memBers Of The BOard Of direCTOrsIn terms of the advisory mechanism, joint meetings are held with the Board of Directors at least six times per year. In the meetings, we discuss the minutes of previous meetings, and other strategic matters related to the Company, addressing the business situations at hand and the strategic issues that require our decision-making. During 2017, the Board of Commissioners held six joint meetings with the Board of Directors. Three meetings were face-to-face while the other three were convened by telephone. The meetings are our platform to build closer teamwork and exchange ideas with respect to the performance of our duties.

reVieW Of Business prOspeCTsThe BOC commends the Company for its robust position as a responsible and low-cost miner. This enables it to withstand the lowest ebbs of the market cycle, while profiting from market highs. Thus, the BOC agrees with the Company’s confident outlook.

The market remains in a state of uncertainty, especially on global nickel supply. Nickel stocks remain high, meaning that there remains a risk of decreasing nickel price if demand weakens or supply exceeds forecasts. Having said this, demand has so far remained strong, and the market is currently in deficit with global stocks in decline for now. Additionally, there is increased optimism that future nickel demand for electric vehicle batteries will bring about a shift in the market at some point in the future.

The Company is well-placed to take advantage of any scenario that unfolds. The BOC believes the company is on the right track to be successful in the near and long-term.

reVieW Of gCg perfOrmanCeThe company is very committed to Good Corporate Governance (GCG), and through a process of careful scrutiny and review, the Board of Commissioners continues to push for the application of GCG in all aspects of the Company’s operations. The Company’s GCG implementation ensures that the Company’s practices are implemented consistently and continuously and are transparent and fair, ensuring that the company’s reputation is maintained benefitting both the majority and minority shareholders.

The BOC has monitored the implementation of new policies, and commends the Company’s efforts to stay on top of these rapidly advancing requirements.

Our anti-corruption policy is considered at the leading edge in Indonesia. We are regularly training suppliers and employees regarding anti-corruption. We have also engaged our suppliers to deliver together our values by not using child and/or forced labour.


rOLe Of COmmiTTees under The BOard Of COmmissiOnersIn carrying out its supervision of the Board of Directors’ performance in managing the Company, the Board of Commissioners is supported by the Audit Committee, Corporate Governance Committee, and a newly formed Risk Mitigation Committee, which have all performed their duties well in accordance with the applicable rules and regulations.

The Audit Committee assists the Board of Commissioners in fulfilling its supervisory responsibilities by attending to the integrity of financial reporting, risk management and financial audits for the Company. It is made up of independent members who meet regularly and report directly to the Board of Commissioners.

There was one change to the composition of the Audit Committee with Jos Luhukay resigning in August 2017 and being replaced with Annie Margono.

The Company would like to thank Jos Luhukay for his dedication during his service.

The Corporate Governance Committee (CGC) assists the Board of Commissioners with respect to corporate governance, nomination and remuneration matters. The CGC is responsible for the annual monitoring of developments in corporate governance best practices, the standards and requirements of all applicable regulatory agencies, self-regulatory bodies and stock exchanges. In addition, the CGC is also tasked with establishing procedures on the supervisory activities related to the performance of the Company’s Board of Commissioners and Board of Directors and carries out assessments on a regular basis.


The Risk Mitigation Committee assists the Board of Commissioners with managing strategic risks at the enterprise level as well as monitoring operational risks at the day-to-day operational level. This involves close coordination of the Risk Management Unit, Line Management and Internal Audit.

A more in-depth discussion of the Audit Committee, Corporate Governance Committee and Risk Management Committee can be found in the Corporate Governance chapter of this Annual Report.

Changes in The BOard Of COmmissiOners COmpOsiTiOnDuring 2017, the composition of the Board of Commissioners did not change. The composition as at December 31, 2017 was*:

• JenniferAnneMaki-PresidentCommissioner• Mark James Travers-Vice President

Commissioner• RobertAllanMorris-Commissioner• MichaelBaril-Commissioner• NobuhiroMatsumoto-Commissioner• AkiraNozaki-Commissioner• AndreaMarquesdeAlmeida-Commissioner• MahendraSiregar-Commissioner• IrwandyArif-Commissioner• RadenSukhyar-Commissioner

appreCiaTiOnAs a final note, we wish to express our appreciation and thanks to the shareholders and our stakeholders for their contributions and belief over the year.

We also extend our appreciation to all members of the Board of Directors for their commitment, leadership and hard work in helping the Company reach its current place in the mining industry.

We send out our thanks to all our employees, committees, loyal customers and business partners without whom the Company would not have had such a successful year.

We hope that these partnerships continue and we will support the management and all members of the Company to continuously increase the Company’s value, and build strategic collaborations so that the Company can achieve its ultimate vision of becoming Indonesia’s number one natural resources company.

* Jennifer Anne Maki resigned as of December 31, 2017

Thank youOn behalf of the Board of Commissioners

PT Vale Indonesia Tbk

mark James TraVersVice President Commissioner


fINaNcIal HIgHlIgHtS

expressed in thousands of US dollars, unless otherwise stated

Description 2017 2016 2015 2014 2013

Profit or Loss and Other Comprehensive Income Highlights

Revenue 629,334 584,143 789,745 1,038,082 921,638

Cost of Revenue (622,780) (550,018) (671,389) (731,420) (781,744)

Gross Profit 6,554 34,125 118,356 306,662 139,894

(Loss)/Profit Before Income Tax (23,020) 5,165 69,828 236,931 55,459

Income Tax Benefit/(Expense) 7,749 (3,259) (19,327) (64,660) (16,807)

(Loss)/Profit for the Year (15,271) 1,906 50,501 172,271 38,652

Net (Loss)/Profit After Tax Attributable to the Owners of the Parent

N/A N/A N/A N/A N/A

Net (Loss)/Profit After Tax Attributable to Non-Controlling Interests

N/A N/A N/A N/A N/A

Total (Loss)/Profit after Tax (15,271) 1,906 50,501 172,271 38,652

Comprehensive Income Attributable to the Owners of the Parent

N/A N/A N/A N/A N/A

Comprehensive Income Attributable to the Non-Controlling Interests

N/A N/A N/A N/A N/A

Total Other Comprehensive Income 49 (1,274) (1,897) (1,125) 4,260

Total Comprehensive (Loss)/Income for the Year

(15,222) 632 48,604 171,146 42,912

Total Oustanding Shares (in Thousand Shares)

3,384,111 3,252,982 2,281,124 3,364,108 2,081,042

(Loss)/Earnings per Share (in IDR) – Basic and Diluted

(20.42) 2.69 68.98 210.95 48.79

Dividends per Share (in IDR) 0 0 0 372.27 243,96


expressed in thousands of US dollars, unless otherwise stated

Description 2017 2016 2015 2014 2013

financial position highlights

Cash and Cash Equivalents 221,699 185,560 194,754 302,256 200,020

Trade Receivables 165,577 146,616 78,200 92,706 65,902

Inventories 117,726 129,796 104,066 139.287 150,996

Other Current Assets 92,054 137,182 217,880 87,185 140,577

Current Assets 597,056 599,154 594,900 621,434 557,495

Other Non-Current Assets 93,714 93,685 90,959 104,233 71,862

Fixed Assets 1,493,789 1,532,653 1,603,302 1,608,523 1,651,762

total Assets 2,184,559 2,225,492 2,289,161 2,334,190 2,281,119

Trade Payables 60,940 64,274 85,636 74,214 75,515

Other Current Liabilities 68,360 67,715 62,863 134,176 93,385

Non-Current Liabilities 235,892 258,914 306,705 340,447 397,953

Total Liabilities 365,192 390,903 455,204 548,837 566,853

Total Equity 1,819,367 1,834,589 1,833,957 1,785,353 1,714,266

total liabilities and equity 2,184,559 2,225,492 2,289,161 2,334,190 2,281,119

Capital Expenditures/Investments 68,525 60,660 106,390 76,846 140,487

Net Working Capital 467,756 467,165 446,401 413,044 388,595

financial ratios

Net Profit Margin (2)% 0% 6% 17% 4%

Gross Profit Margin 1% 6% 15% 30% 15%

Return on Average Equity (ROE) (1)% 0% 3% 10% 2%

Return on Average Assets (ROA) (1)% 0% 2% 7% 2%

Debt/Equity 4% 4% 5% 4% 4%

Debt/Assets 3% 3% 4% 3% 3%

Receivable Turnover (Days) 89 69 39 28 35

Inventory Turnover (Days) 97 123 96 90 84

Current Ratio 4.62 4.54 4.01 2.98 3.30

The Company does not own investment in associate entity


Screening StationWet Ore

Stock Pile

Ore Mining

Dryer Kiln

Dry Ore Storage

Reduction Kiln

Electric Furnace

1 23

4

5

6 7

9Shipment

8Converter

10Port

PRoDUctIoN PRoceSS


Screening StationWet Ore

Stock Pile

Ore Mining

Dryer Kiln

Dry Ore Storage

Reduction Kiln

Electric Furnace

1 23

4

5

6 7

9Shipment

8Converter

10Port


pT Vale indonesia Tbk

the energy Building, 31st floorScBD lot 11aJl. Jenderal Sudirman Kav. 52-53Jakarta 12190, Indonesiatel: +62 21 524 9000fax: +62 21 524 9020

www.vale.com/indonesia

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